First, Caroline Ellison begged Sam Bankman-Fried to publicly acknowledge their romantic relationship. Then she testified against the FTX founder. Now, she’s facing the court herself.

On September 24, the former CEO of FTX’s hedge fund arm Alameda Research will be sentenced by Judge Lewis A. Kaplan. She faces seven criminal charges, including conspiracy to commit wire and securities fraud. The maximum collective time for the charges is 110 years in prison.

‘She’ll be out inside of a year’

Carl Volz

Her sentence will likely be about two-years in the slammer for her role in the failed crypto exchange FTX, says Carl Volz, a Chicago-based securities attorney who has defended crypto clients.

But Ellison will probably be out much sooner.

“The way the federal court system or the federal jail system works, with good behaviour, she’ll be out inside of a year,” Volz told DL News. “She’ll probably be on probation for quite some time, which will make her life difficult.”

Ellison pleaded guilty to the charges in December when she became the first member of Bankman-Fried’s inner circle to strike a plea deal with prosecutors.

“Any decent lawyer will try to get an agreement in writing before they agree to cooperate,” Volz said.

Her defence wouldn’t have let her testify against Bankman-Fried without some guarantee “that they’re going to get what they ask for.”

This week, prosecutors wrote to Judge Kaplan, saying that Ellison’s cooperation was “substantial” and “exemplary.”

Her testimony contributed to her ex-boyfriend’s conviction for seven criminal charges and 25-year prison sentence. He has appealed the verdict.

Cooperating witnesses can sometimes get off more easily, especially if they can help catch bigger fish.

Andrew Fastow, the CFO of Enron, got six years in prison after testifying against CEO Jeffrey Skilling about accountancy fraud.

He served five. Skilling was originally sentenced to 24 years in jail, but served 12.

Time served

Ellison shouldn’t be sent to prison, her lawyers argued in a sentencing memorandum filed earlier this month. Instead, she should be sentenced to time served.

“Caroline blames no one but herself for what she did. She regrets her role deeply and will carry shame and remorse to her grave,” her defence team wrote.

She has grown “wary of going out in public” due to fear of being recognised, and “been rendered effectively unemployable,” the team wrote.

Her lawyers also accused Bankman-Fried of being manipulative during their relationship. The team reminded the court that Bankman-Fried leaked Ellison’s diary to the press in 2023.

Judge Kaplan is unlikely to be swayed by the argument that Ellison was a victim, Volz said.

“There were many people who were bigger victims,” he said.

Volz said it’s likely that the judge will show that he is “serious about penalising conduct like this, but not necessarily so severe that it ends her life.”

Volz said it is common for defence teams to ask for more than they expect to get.

Ellison’s defence team did not return a request for comment.

Jane Street

Ellison met Bankman-Fried in 2015 at quantitative trading firm Jane Street. She was an intern, he was a junior trader.

“I was kind of, like, terrified of him,” she told Michael Lewis in his book, “Going Infinite: The Rise and Fall of a New Tycoon.”

They bonded over their shared interest in effective altruism, a philosophy whose adherents seek to maximise the good they do in the world.

Usually, that meant earning as much money as they could to support worthy causes.

One of those causes was the risk of artificial intelligence rising up and wiping out humanity. Lewis noted Bankman-Fried’s concerns about this in Going Infinite.

A letter from one of Ellison’s friends to Judge Kaplan argues that the former Alameda CEO was driven to earn as much money as possible to help prevent “this AI disaster.”

In 2017, Bankman-Fried offered her a job at Alameda. By 2022, she had become co-CEO alongside crypto quant trader Sam Trabucco.

During this period, Ellison and Bankman-Fried had formed a romantic relationship. Ellison asked Bankman-Fried to go public with their relationship, but he wanted to keep it a secret, according to Going Infinite.

Her lawyers repeated this view in the sentencing memorandum.

In June 2022, Ellison discovered an anomaly in Alameda’s FTX account and shared her concerns with FTX’s Director of Engineering Nishad Singh.

In September, she told Singh she was growing worried about Alameda’s market exposure. He then relayed the message to Bankman-Fried. FTX collapsed in November 2022.

Both Singh and Ellison testified against Bankman-Fried at his trial. Singh will be sentenced on October 30.

Another star witness, FTX’s CTO Gary Wang, will be sentenced on November 20.

Former co-CEO of FTX’s Bahamas subsidiary Ryan Salame was sentenced to seven and a half years in prison in May. He is due to begin his sentence on October 13.

‘A vast improvement over her ex’

Since the trial, Ellison has been engaged in volunteer work and written a novel, according to her lawyers.

“Caroline has also drawn comfort from a new partner,” they added.

In a letter to Judge Kaplan, one of her friends said she learned about the new relationship in October 2022.

The friend described him as “a vast improvement over her ex.”

“Her new partner is honest and has integrity; he finds even the small white lies of corporate politics distasteful,” her friend wrote.

“I have known him to be kind, intelligent and empathetic.

He has quietly supported her this last year. I believe that this new and kind environment will be good for her.”

Eric Johansson is DL News’ News Editor. Got a tip? Email at eric@dlnews.com.